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  5. Stock Market Outlook - 2022-02-27

Stock Market Outlook
For The Week Of February 27th = Downtrend


    ADX Directional Indicators: Downtrend
    Price & Volume Action: Downtrend
    Elliott Wave Analysis: Downtrend


The stock market outlook remains in a downtrend, although stocks rebounded broadly to close the week.

Despite the Russian invasion of Ukraine, the S&P500 ($SPX) actually ended up 0.8% last week after a massive rally on Thursday that spilled over into Friday. The index currently sits ~2% below the 200-day moving average and ~4% below the 50-day.

Technical analysis of daily SPX prices

2022-02-27-SPX Trendline Analysis - Daily

The ADX signal continues to show a bearish trend in place, and has done so since the directional indicators crossed over January 4th.

The price/volume signal also shows a downtrend.  Distribution days have come in pair since late January, so the selling hasn't been THAT bad.  Rather, it seems like a lack of buyers has been the recent issue.  Not surprisingly, the charts of leading companies remain an issue; very few are showing price patterns associated with accumulation.

Technical analysis of daily SPX prices

2022-02-27- SPX Elliott Wave Analysis - Daily - Primary 3

Elliott Wave continues to show a downtrend.  The potentially bullish count bit the dust last week, and both Bearish counts remain in play.

Technical analysis of daily SPX prices

2022-02-27-SPX Elliott Wave Analysis - Daily - Primary 2 - Intermediate A/C

Some counts have suggested that last week’s low was the bottom (i.e. the entire ABC correction).  I’m skeptical, but will trade based the price and volume action.  Both bearish counts are invalidated if the SPX rises above 4450.


The situation in Ukraine went from bad to worse, as cooler heads did not prevail.  

Something changed in the Russian calculus, where an actual invasion / occupation of Ukraine is beneficial. In response, U.S. and European countries imposed economic sanctions on Russia's financial and technology sectors, although oil and energy were not included (yet). 

As of this weekend, certain Russian banks are set to be expelled from SWIFT, the highly secure global network used for global financial transactions.

The conflict is still in the early stages, and so far, the long-term impact to the U.S. markets appears to be limited.  That said, the U.S. economy already faced significant challenges that aren't made any easier by the conflict. 

The U.S. yield curve continues to flatten, as the bond traders come to grips with upcoming Fed rate hikes and higher levels of inflation.  Watch for an inversion (long-term higher than short term), which would indicate lower expectations for future growth and has a good track record of being a leading indicator for recessions.

I'm reminded of a line from the movie "National Treasure":  "Cooperation only lasts as long as the status quo is unchanged".   Unfortunately, the status quo has changed.  The longer this conflict drags on, the more former areas of cooperation are at risk.

Best To Your Week!

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